* New CEO sets out debt reduction plans, asset sales
* Tim Brasil is strategic asset, but will be pragmatic
* Aims to win back investment grade rating by 2016
* Will need to repair domestic market to regain rating
By Leila Abboud
BARCELONA, Nov 20 (Reuters) - Telecom Italia expects to conclude the sale and lease back of its mobile towers in Italy and Brazil next year, its chief executive said on Wednesday.
Along with a separate sale of some digital broadcasting assets, the tower deals are part of a new strategy and debt reduction plan announced by Telecom Italia's new chief executive, Marco Patuano, in early November.
The debt-laden group, whose credit rating has been recently downgraded to junk by the Moody's and S&P agencies, aims to raise at least 2 billion euros ($2.7 billion) from the sales.
It has also agreed to sell its Argentinian unit for $960 million and carried out a mandatory convertible bond to bring in a total of 4 billion euros to cut debt.
"The process is much more advanced in Italy than in Brazil," Patuano said of the tower deals in an interview on the sidelines of a Morgan Stanley investment conference.
"We assume that it could be second quarter of 2014 for marketing the Italy deal, and for Brazil the process is still in an initial phase. So we will do that sometime in 2014."
A separate effort to sell digital television broadcasting assets owned by Telecom Italia's media division Telecom Italia Media is also moving ahead.
The company wants to combine its three digital broadcasting multiplexes with two owned by Italy's Gruppo Espresso and then sell the whole, Patuano said.
"We have approved the evaluation of the combination of assets with another owner of multiplex, Gruppo Espresso," he explained. "Our aim is to combine with Gruppo Espresso in the first half of next year and then carry out a sale process."
He declined to say when the entire sale would be completed.
Patuano, a 49 year old executive who has served as chief operating officer since 2011 and once run Telecom Italia's Latin American units, is racing to put the former state-owned monopoly on sounder footing as a fierce mobile price war rages in its home market. The company has 28.23 billion euros in net debt - more than double its market value.
Patuano said getting back an investment grade credit rating would depend on stabilising the business in recession-wracked Italy since it generates 90 percent of free cash flow there.
"The domestic market stabilisation is something that remains in Power Point rather than a fact," he said. "Once it is a reality, we will talk to the rating agencies again," he added, suggesting that this may be done by 2016.
Nevertheless, Telecom Italia ruled out a capital increase because it said the current plan would suffice to reduce debt.
Another challenge for Patuano is managing the delicate relationship with largest shareholder Telefonica, which agreed in September to gradually boost its stake in the holding company that owns 22.4 percent of Telecom Italia and controls its board.
Telefonica backed Patuano's new strategy but questions remain over the whether the shareholder will push for Telecom Italia to divest its mobile operator in Brazil, Tim Participacoes.
Sources familiar with the matter earlier told Reuters the Spanish group would seek a sale or break-up of Tim Brasil, which analysts value around 8.9 billion euros, from the middle of next year. Telefonica's Vivo brand is the market leader in Brazil's mobile market and competes with Tim Participacoes.
During a question and answer session, Patuano reiterated Brazil was a strategic asset for Telecom Italia, but said the group could review its stance if it got an attractive offer for the asset.
"I would be a happy with a big cheque (for Brazil), but the real question I need to answer to my shareholders is what do I do with the money to create value?" he said.
Patuano explained there were competing interests at play in the Brazilian question, including Telecom Italia's desire to grow the business as mobile broadband is rolled out in the coming years and other Brazilian mobile groups' desire to consolidate the market to reap cost savings. Tim Brasil could even attract interest from bidders not yet in the market.
"It's not easy to see which scenario adds more value to my shareholders but as a manager I need to be pragmatic," he said.
"I think the second part of the story in Brazil is still to be written."